Deng: Double whammy of EU steel safeguards and US duties would be ‘disaster’ for Taiwan

A decision by the EU to slap safeguards on foreign steel would have severe repercussions in Taiwan, whose exports of the alloy to the US are already subject to 25% duties, says Taiwan’s top trade negotiator. Without an exemption from the US tariffs – something Taiwan has tried and failed to secure so far – any European duties or quotas on imported steel would deal a blow to Taiwanese industry, John Deng told Borderlex.

“That would be a disaster to us,” the diplomat said during an interview at his office in Taipei. “The steel industry is quite an important industry in Taiwan.”

The steel sector employs about 52,500 people and has a production value of $36 billion, according to government figures. About 20% of total production is exported.

Deng is still trying to win an exemption from the US tariffs, which entered into force on 23 March and seek to address a global steel glut caused by Chinese overproduction. But there’s no guarantee he’ll be successful – especially because Taiwan buys the biggest share of China’s stainless-steel exports.

Taiwan, the world’s 12th-largest steel exporter, bought 21% of China’s steel exports last year and accounted for 22% of Chinese stainless flat steel exports in the first two months of 2018. About 39% of Taiwan’s steel imports come from China, 29% from Japan and 13% from South Korea, Taiwanese government figures show.

Taipei is now reportedly weighing a ban on Chinese steel as a way to distance itself from the main target of the US levies and persuade the Trump administration that Taiwanese steel should be exempt because it doesn’t originate in China. But with China supplying as much as three-fourths of the stainless steel imported by Taiwan, such a ban would probably cause serious supply issues for Taiwanese mills.

“We have been working with the US government to see if both sides can come up with an alternative, but so far we are still on the list,” Deng said. “We need to continue this consultation process. Otherwise, this alternative way cannot be found. We have to work with our industry to see what measures we can take to see if they can find alternatives to Chinese steel.”

EU probe stems from diversion fear

Although Deng’s top priority is getting Taiwan exempted from the US tariffs, he’s also keeping an eye on the EU’s safeguard investigation, which could end with a three-year blanket quota or duties on all foreign steel. Europe opened the probe into 26 carbon and stainless-steel products last month, saying it was concerned that imports redirected from the US could harm European industry. The EU, which won a temporary reprieve from the US duties, fears that foreign steel manufacturers that are subject to the levies may divert their goods to the bloc, “disturbing the market and skewing prices”.

Taiwan already faces European dumping duties on steel. In January 2017, the EU levied tariffs ranging from 5.1% to 12.1% on two types of Taiwanese steel products that are used by the energy-generation and shipbuilding industries, among others, to join stainless steel pipes and tubes. At the same time, the EU imposed dumping tariffs of 30.7% to 64.9% on the same sort of Chinese steel.

The EU is Taiwan’s fourth-biggest trade partner after China, the US and Japan. Taiwanese steel exports to the bloc jumped 65% to 29.3 million tonnes between 2013 and last year, according to the country’s Ministry of Economic Affairs.

The outcome of the EU’s safeguard investigation may not be known for up to nine months, but in the meantime, Deng worries that more trade partners will create barriers to foreign steel.

“China overproduces and the US closes their door. Then things moved to Europe, and Europe is closing their door. If things move to Asia, Asia has to close its door,” he said. “It means that no rules can apply in trade of that product. The business pattern will be changed.”

This fear, along with his concern that rival steel producers such as South Korea that were exempted from the US duties “will be unfairly advantaged”, keeps Deng focused on trying to win an exclusion for Taiwan.